Policyowners pay a periodic premium and insurers pay a stipulated death benefit if the insured dies within the coverage period. Premiums are lower than for permanent insurance, and the policies have not cash value. Annually renewable policies initially carry extremely low premiums, but these premiums rise each year and can become very expensive later in life. The insurer will limit coverage up to a certain age. Level-premium term policies charge the same periodic premium through the entire contract. These contracts may cover 10, 20, 30 or even more years, though level premiums are not always guaranteed for the entire paying preiod. Many offer conversion to permanent products without new underwriting. Some also offer continuation of the policy past the term on an annually renewable basis, but often at extremely high premiums. Prospects who qualify for preferred risk classes will pay lower premiums than those in standard risk classes.

Who needs it

Anyone who needs life insurance only for a cetain period. For example, young families that need protection while children are young and until retirement income is saved. Business that want to cover the life of a key employee until retirement. Those who want to supplement permanent life insurance.

Who may not need it

Anyone who may not need life insurance, such as a single person with no dependents. Someone who needs permanent insurance.

When to buy it

Though potentially useful at any time in life, term insurance is most often appropriate for young families that need to protect income. The younger and healthier an insuraed is, the less term insurance will cost.

Term life insurance coverage that can be converted into permanent insurance regardless of an insured's physical condition and without a medical examination. The individual cannot be denied coverage or charged an additional premium for any health problems.

The length of time (usually 31 days) after a premium is due and unpaid during which the policy, including all riders, remains in force. If a premium is paid during the grace period, the premium is considered to have been paid on time. In Universal Life policies, it typically provides for coverage to remain in force for 60 days following the date cash value becomes insufficient to support the payment of monthly insurance costs.

Risk class, in insurance underwriting, is a grouping of insureds with a similar level of risk. Typical underwriting classifications are preferred, standard and substandard, smoking and non-smoking, male and female.